Keep in mind that because the pipes will be exposed and the run length may be longer, you open yourself up to potential freezing issues and a long wait for hot at the fixtures. It may also end up being less efficient because the tank, regardless of how well it is insulated, will be sitting in unconditioned space which could be quite cold. If the thing did get shut off, the pilot blew out, or for some other reason stopped heating, the entire tank could be subject to freezing.

Have my answer, spoke with the county folks and they say it can be anywhere in a crawl space or shed, main items are that everything is done to code especially the vents and obviously lag the pipes etc to avoid freezing.